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Quebec "Debt Clock"

Quebec "Debt Clock"

Our Quebec "Debt Clock" shows the growth of the public sector debt in real time. Public sector debt includes the government's gross debt as well as the debt of the health and social services and education networks, municipalities and other public corporations for which the government is ultimately responsible.

Quebec's Debt

Debt per taxpayer

Make your voice heard! Click here to send a message to Quebec's Minister of Finance

Dear Minister of Finance,

I am writing to let you know about my deep concern regarding the state of Quebec's public finances. As you know, the public sector debt has now reached over 270 billion dollars. This is the equivalent of $129,000 of debt per family of four, or $64,300 per taxpayer.

The Quebec government has to stop continually increasing the debt. Since the tax burden is already very high, the solution must involve a reduction in government expenditures so that we can eliminate the deficit and then start paying down the debt.

Thank you in advance for your time and attention.

Sincerely,

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Watch our short video "The Story of Quebec's Debt"

We released this video in 2011. Updated data are available on this page.

Quebec's public sector debt

Our Quebec "Debt Clock" shows the growth of the public sector debt in real time. Public sector debt includes the government's gross debt as well as the debt of Hydro-Québec, of the municipalities, and of the universities other than the Université du Québec and its constituent universities.

Based on data provided by the Quebec Department of Finance in its December 2018 economic update (which does not take into account Quebec’s share of the federal debt), we estimate that the debt will increase by $3.5 billion by March 31, 2019, the equivalent of $9.7 million per day, $6,716 per minute, or $112 per second.

Questions & Answers about Quebec's Debt

1. Why use public sector debt?

When analyzing a government’s indebtedness, it is necessary to go beyond what it manages directly and include the health and education networks, municipalities and other entities under the government’s ultimate responsibility, since the government guarantees their debt. Public sector debt is therefore the most exhaustive measure of Quebec’s debt, the one that provides a picture of what the government of Quebec borrows either directly or indirectly.

2. Why not take government assets into account?

The only “liquid” assets of the government, those that could be sold quickly to pay off debt, are net financial assets. These assets came to $24.5 billion as of March 31, 2018. It is hard to assess the market value of government-owned fixed assets and infrastructure (roads, bridges, schools, national parks, etc.) since there are no relevant markets. Moreover, it is highly unlikely that the government would sell schools or bridges at some point to pay off the debt. This is why neither the government nor the auditor general takes these assets into account in attempting to paint a realistic picture of the debt that Quebecers will eventually have to repay. These assets are certainly part of Quebecers’ financial heritage, but they do not reduce the overall bill – or the growing interest – that Quebecers will have to pay. The Quebec government could sell crown corporations such as Hydro-Québec (as proposed by Claude Garcia in a Research Paper published by the MEI) to restore its finances. However, the same people that insist on including government assets in its debt generally reject that option.

3. How much does debt service cost the government every year?

In 2018-2019, $9.1 billion for the government and government agencies.

4. Should we worry about the government’s debt?

A great risk is hidden in another form of government indebtedness: its commitments to pay benefits under a vast array of social programs. Examples include payments under the Quebec Pension Plan, motor vehicle insurance (SAAQ), parental insurance (RQAP) or even subsidized spaces in childcare centres. Although social programs do not represent debt as such, since the government can always modify their nature, maintaining them is likely to require Quebec to raise employees’ and employers’ contributions or to reduce benefits.

Also, certain cyclical factors could, in coming years, quickly worsen the province’s debt problem. Among other factors, there is the aging of the population (more pronounced in Quebec than elsewhere in Canada), which will put added pressure on our health care system, as well as the likelihood of higher interest rates in the near future, which will raise the cost of debt service.

5. How is the growth of the public sector debt estimated for the coming year?

The Quebec Department of Finance does not provide an estimate of the growth of the public sector debt for the coming year. It does, however, provide an estimate of the increase in the government’s gross debt in its budget each year, which is the largest component of the public sector debt (the gross debt accounts for 75% of the public sector debt).

Here is the method used by the MEI to estimate the increase in the public sector debt since March 31, 2018:

For the “government’s gross debt” component, the MEI simply takes the Quebec Department of Finance’s predictions;

For “Hydro-Québec’s debt,” “municipalities’ debt” and “universities’ debt,” the estimates come from their average annual growth rates over the past four years;

The “other government enterprises’ debt” component is considered stable.

Components of the public sector debt (millions of dollars)

March 31, 2018

March 31, 2019

Variation

-Government’s gross debt

201,071

203,736

+ 1.3%

-Hydro-Québec’s debt

43,160

43,691

+ 1.2%

-Municipalities’ debt

24,505

24,919

+ 1.7%

-Universities’ debt (other than the Université du
Québec and its constituent universities)

The Quebec government’s debt is owed to holders of the bonds it has issued, most of whom are either Quebec citizens or Quebec institutions (financial institutions, retirement plans, mutual funds, etc.). For example, the advertising campaigns of Épargne Placements Québec encourage individual investors to buy Quebec government bonds.

A portion of the government’s debt is held outside of the province of Quebec. However, there are no real data on holders of Quebec debt or on their countries of residence.

The Quebec government’s debt is also made up in part of a retirement plan liability, which is to say what the government has promised in retirement benefits to its civil servants without having accumulated sufficient funds to fulfil those promises. This government debt is not negotiated on the bond markets. It is instead a debt calculated by actuaries, but it is very real nonetheless. This portion of the debt being owed to public sector retirees, they are the ones who “hold” it, so to speak.

7. If Quebec’s debt is mainly owed to Quebecers, who therefore owe it “to themselves,” couldn’t it simply be cancelled?

Even though the Quebec government’s debt is mainly owed to Quebecers, it creates a public finance problem. We cannot say that it is money that Quebecers owe “to themselves,” as though it could just be cancelled tomorrow morning. In a payment default scenario (if the Quebec government stopped redeeming its bonds), all investors who bought those bonds would lose their money. Of course, Quebec taxpayers as a whole would “benefit,” since they would not have to pay back this money with their taxes, but this operation would constitute a kind of theft of investors’ money (many of whom are retirees). It is as if we cancelled a family’s mortgage: the family would benefit, but the bank would lose its money (which comes from other clients’ accounts) and would be very reluctant to lend again in the future! If we want to reduce the debt, which is growing rapidly, the only fair way to do so is to encourage the government to stop going further and further into debt and to pay down the debt by buying back its bonds.

8. What is the Quebec government’s credit rating?

The Quebec government’s credit rating basically has an effect on the interest rate that it pays on its debt. Various rating agencies assign a credit rating to the Quebec government. These ratings are indicated in the Quebec Finance Minister’s budget each year. Currently, the two main rating agencies assign Quebec ratings of Aa2 (Moody’s), the same as for Ontario, and AA- (Standard & Poor’s), higher than for Ontario.

9. What effect would an increase in the interest rate applicable to the debt have on the Quebec government’s finances?

In fact, there is not one single interest rate applicable to the debt, but rather several rates according to when the bonds mature.

In addition to new loans, each time a part of the government’s debt comes due, money must be borrowed again if the government lacks the means to pay down the debt. An increase in the cost of borrowing would not be felt immediately since it would be applied only to the “borrowed again” part of the debt. For example, from January 2014 to December 2018, about one-third of bonds mature. In time, of course, a larger and larger proportion of the Quebec debt would be at a higher rate of interest.

In a Viewpoint addressing this question, Lenka Martinek estimates that a rise of 2 percentage points in interest rates would require $1.3 billion per year in additional spending on debt service after five years. If this amount is not dramatic in itself, it is still equivalent to the combined budgets of the Environment, Culture and International Relations departments at the time that this Viewpoint was published.

10. Is it true that the debt was reduced, and if so, why is the Debt Clock still going up?

It is true for certain measures of the Quebec government’s indebtedness.

For the first time since the late 1950s, the government’s gross debt was reduced during fiscal year 2015-2016. It increased modestly the following year, however, rising from $203.3 billion to $203.5 billion on March 31, 2017, to then fall again in 2018. It will increase in the coming years, however. These first reductions of the gross debt nonetheless deserve to be pointed out, and hopefully they will be repeated in the future.

Another measure, the net debt, has followed a similar trend. It was reduced from 2015-2016 to 2018-2019, but will increase for the next two years, until 2020-21. As for the debt represented by cumulative deficits, it decreased and will continue to decrease.

The public sector debt illustrated by our Debt Clock, for its part, was reduced in 2016-2017 and in 2017-2018. It will start increasing again in 2018-2019 according to Finance Department projections for the evolution of the gross debt, as well as our own projections for the evolution of the debt of Hydro-Québec, for which the government is ultimately responsible.

11. Is Quebec’s debt still the highest among all the provinces?

The province of Newfoundland and Labrador is now deeper in debt than Quebec, whether in terms of gross debt as a proportion of GDP, cumulative deficits as a proportion of GDP, or net debt as a proportion of GDP.

We recommend a special selection of publications that closely examine the issue of Quebec's public finances. These publications explore ideas for improving the organization and the management of the resources within the Quebec government apparatus in order to modernize it and reform its financing methods.

Viewpoint – Public Sector Pay Grades
Youri Chassin, Alexandre Moreau - March 12, 2015
Viewpoint aiming to clear up the confusion surrounding the figures discussed in the public debate in the context of current negotiations for the renewal of public sector collective agreements

Who Spends More: Left or Right?
Michel Kelly-Gagnon, Vincent Geloso - March 26, 2013
Economic Note showing the absence of correlation between the governing party's ideology and the evolution of public spending as a share of GDP

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